A cap table is the ledger of who owns what in a startup. Learn how to read one, how dilution works, and why the percentages shift with every round.
A capitalisation table — the “cap table” — is simply the record of who owns a company and how much. It lists every shareholder, every option pool, and every instrument that could turn into shares later. It’s one of the most important documents in a startup, and learning to read it demystifies how founders, employees and investors actually share in an outcome.
At its core, a cap table lists holders and their share counts, which translate into ownership percentages. The main categories are:
Ownership is always expressed two ways: on an issued basis (shares actually outstanding) and on a fully diluted basis (including all options and convertibles as if they’d been exercised). The fully diluted view is the honest one, because it shows what everyone will own once the dust settles.
Dilution is what happens to your percentage when new shares are created. Your number of shares doesn’t change — but the total grows, so your slice of the pie gets smaller.
A simple example: you own 100 shares of a company with 1,000 total, so you own 10%. The company issues 250 new shares to a new investor. Now there are 1,250 shares, and your 100 represent 8%. You weren’t robbed — the company just got bigger.
Dilution isn’t inherently bad. A smaller slice of a much larger pie is the entire point of raising venture capital.
Imagine a founder owns 100% of a company at incorporation. Watch what happens across a few events:
By Series B, founders who started with 100% might hold 40–50%, and that’s a healthy outcome. The capital they sold along the way is what made the company valuable enough for their remaining stake to be worth far more than the original whole.
Not all shares are equal. Investors almost always buy preferred stock, which carries protections that common stock (held by founders and employees) does not.
The most important is the liquidation preference: in an exit, preferred holders get their money back before common holders see anything. A “1x” preference means investors recover their investment first. This rarely matters in a big success, but in a modest exit it can mean common shareholders receive far less than the headline price suggests.
Preferred stock often comes with anti-dilution provisions, pro-rata rights (to keep their percentage in future rounds), and board seats. These don’t show up as a number on the cap table, but they shape who really controls the company.
Startups reserve a chunk of equity — often 10–20% — to grant employees as options. Investors frequently insist the pool be expanded before their round, which means the dilution from new hires lands on the founders rather than the incoming investor. This is sometimes called the “option pool shuffle,” and it’s worth understanding because it quietly lowers founder ownership.
Whether you’re an employee weighing an offer, a founder modelling a raise, or an observer trying to understand a deal, the cap table answers the real question: when this company exits, who gets paid and how much?
A clean, well-understood cap table is a sign of a well-run company. A messy one — with stacked preferences and forgotten convertibles — is a warning sign that the eventual payout may not match the story.